“Truly, 2022 was unprecedented in terms of the rapidness with which the FED raised rates.”
On February 2, Ryan O’Connell hosted the first BTWM Virtual Lunch Webinar of the year. While covering a wide range of topics during the 30-minute session, the focus of the discussion was finding balance in 2023.
The webinar started with a brief wrap-up of the last year in the market. The one word that can’t be avoided when describing what happened is inflation. Inflation concerns prompted several rate hikes by the Federal Reserve. However, despite unprecedented rate hikes over the past 12 months, including the largest in 28 years, they might not be over. Based on the Fed recently mentioning “hikes”, instead of a single hike, it appears the FED will raise rates again in 2023, and likely raise them by a combined 50 basis points.
Is the Fed Doing Too Much?
It’s fair to question if the Federal Reserve has done too much too fast over the past two years. During the webinar, Ryan compared rate hikes and the current state of the market to a rogue cruise ship captain. As a ship approaches the shore, the captain should begin to slow it down to prevent impact. As inflation settles after the severe ups and downs experienced as a result of the pandemic, the Fed continues to put its foot on the gas to battle inflation that appears to have peaked.
Have the rate hikes been reckless? Only time will tell. Either way, as investors, we will have to roll with these decisions while taking in as much information as possible to make the best decisions we can.
Where We Stand
“I feel more at peace with where equities are priced than in 2022,” Ryan says. “Valuations look more attractive coming into the year,” he continues. Ryan shared LPL Financial’s expectations for the year, which include a possible mild recession.
“We’ll be range bound… we’ll be violently flat.”
Despite feeling optimistic about 2023, Ryan cautioned against getting overly excited based on the market’s performance in January. “It doesn’t make sense to me how good January was,” Ryan says. Although we started the year off strong, Ryan expects a “rocky road” that will likely end with modest gains.
What Should We Do?
We can’t control the market, but we can control how we approach investing based on our needs and goals. If you’re drawing funds from your portfolio, cash flow needs to be your focus rather than relying on the market’s ups and downs. “You can throw away sections of the paper and turn off the news because it won’t matter,” Ryan says.
Additional tidbits from the webinar included the following:
- We are still essentially at 50-year lows with unemployment
- Wages aren’t growing
- The feared upcoming recession appears to be mild
- Rate cuts are not likely until 2024
- The dollar weakening opens opportunities for investing abroad
Stay tuned for details on the Q2 BTWM Virtual Lunch Webinar. As always, if you need any assistance, call Blooming Tree Wealth Management at 309-300-2760.